We here at Smartwealth, are independent financial security advisors in Canada, serving the provinces of Ontario and Manitoba. Though anyone can access the information on our website, we only serve residents (includes visitors & students) of areas where we are licensed to serve (see licenses page here).
Our Canadian financial advisory services encompasses the following:
- Corporate-owned Life Insurance / Corporate Retirement Strategy
- Infinite Banking Concept
- Insured Retirement Plan
- Living Benefits (Critical Illness/Disability Insurance)
- No-Medical Life Insurance
- Mortgage Protection Insurance
- Self-Employed Health Benefits
- Retiree Health Insurance
- Snowbird and Visitors to Canada Medical Insurance
- Registered Educations Savings Plan
- Tax-Free Savings Account
- Registered Retirement Savings Plan
- Life Annuities
Our process helps you lay down the necessary foundation that mitigates the financial risks of a serious illness, injury or premature death that may result to loss of or reduced income for yourself and/or your household.
We then help you put in place financial plans that tax-efficiently build out your wealth over time so you can make money work for you when you decide to retire from active work.
With us, it’s about your financial well-being and that of those you love!
As opposed to popular belief, your savings and investments aren’t the foundation of your financial plan, risk management is.
Risk management helps you mitigate the risks of certain life events that may affect your ability to make a living for yourself and loved ones, thereby safeguarding your financial security and your loved ones’ future.
If you’re like most of us, your income is dependent on your ability to actively work in a job, profession or business.
This is our most important asset!
Unfortunately, this asset can be stripped away by a serious illness, disability or premature death.
Canadian families affected by these life-altering events know that income stops when a person can’t work, and that affects their financial security as well as of those who rely on them for financial support.
If you don’t have the necessary risk management measures that mitigate the financial impact of these life events, you may find yourself and loved ones’ in a less-desirable financial situation.
Again, the most important asset that you and those who rely on you for financial support is YOU, when you are at WORK, which equates to income.
If you’re unable to work due to an illness, disability or premature death; INCOME STOPS.
And while we can’t physically safeguard ourselves from being affected by these life events, a well-planned risk management strategy can help minimize their financial impact, thereby safeguarding your financial security and future in the event of a worst-case scenario.
Based on statistics, 47% of Canadians aged 65 require financial assistance in order to make ends meet at retirement.
That’s almost half of the population!
Most of these retirees may have made a lot of money at some point in their career(s) but failed to plan for their future.
If you’re young and reading this, recognize that you cannot work forever and that whether you like it or not, there will be a point in your life that you will have to stop working actively due to old age.
People age, and every decade that passes by, brings you closer to retirement age.
A lot of people are forced into retirement only because they turned 65, not because they are financially ready to retire.
The very reason why some of our beloved seniors find themselves having to find jobs a couple of years after they “retire”.
Retirement isn’t about graduating from the workforce when you turn 65, it’s simply a time in your life when you no longer have to work for money because you have accumulated more than enough for it to work for you, and it doesn’t have to be at 65!
Say, you want to earn $5,000.00 a month passively at retirement.
This $5,000.00 a month must come somewhere, you need the capital that will provide you with the needed $5,000.00 a month income.
Following the rule of 4, you need to accumulate at least $1,500,000.00 in your retirement fund, which means if you invest $1,500,000.00 in an annuity or an investment with a target distribution rate of 4% a year, you will receive an annual income of $60,000.00 a year or $5,000.00 a month.
Another way of using your funds is of course by withdrawing from it; if you withdraw $60,000.00 a year from your retirement fund of $1,500,000.00, your wealth will keep you afloat for 25-years without working, just don’t live passed that point ;).
The computation cited above didn’t take into consideration government pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS), if you’re 35 years old and are making $50,000.00 a year, with a target retirement age of 65 years old, you could expect to receive $19,391.00 per year from government pensions, which equates to $1,615.92 a month.
Taking this in consideration, you will only need to accumulate the necessary capital that will give you $3,384.08 of monthly income, which is a bit lesser than if you’re not taking government pensions into account.
In this case, you will need to accumulate, $1,015,224.00, or simply round it off to $1,000,000.00.
You might be thinking, these are big numbers we’re talking about, how can I build that kind of wealth?
Well, there are a lot of ways that could lead to a million dollars, the best way is called, “slow and steady”, building wealth is like planting a tree. You plant when you don’t need the fruits yet.
Moral of the story?
Start early and be consistent!
The example below, depicts a $250.00 bi-weekly investment, without indexation, which means, the individual just contributed $250 bi-weekly all throughout the saving phase of his/her retirement, at an average rate of return of 6%, he or she would have built a $1M portfolio, simply by automating her investment contribution.
Again, you might be thinking, 40-years to $1M? Well, how many people who are aged 65 that you know who have $1M in their portfolio? Not too many, I would assume.
Sure, you can build that amount in half the time but you have to be willing to put in more!
To put more, you have to make more… it’s simple math really, the more money you set aside to grow your wealth, the faster it compounds, the sooner you achieve your wealth accumulation goals.
The easiest way to start accumulating wealth is to start now if you haven’t started yet; if you’re in your 20’s, you have to set aside at least 10% of your gross income as your wealth accumulation fund, regardless of your income and work-up from it.
In the example cited above, if you index your bi-weekly contribution by 2.25% every year, which means, your contribution increases by that rate every year, you will have the below results:
I understand that this is a slow way of building wealth, and I have to admit that this may even appear boring to some people but keep in mind that this is the money that you set aside that will work for you when you’re no longer able to work or decide that you’re done with work.
Of course, it doesn’t always have to be 40-years, heck you can build wealth in 10 or 20-years, it just depends on how much you’re comfortable investing toward your future.
Can you see yourself saving 50% – 75% of your gross income? If so, you can build wealth faster! But this strategy may be overwhelming to most people, so start with your comfort level.
Ideally, we should be setting aside 25% of our gross income for our risk management and wealth accumulation plans. This way, way have both sides covered.
If you’re an extreme wealth-builder, you may decide to put in more but the most important thing for most people is to simply get started, and be consistent.
Understand that wealth-building is a marathon, not a sprint, that’s why consistency is so important.
As you may know, there’s no one-size-fits-all formula for wealth accumulation. Everyone can build wealth, regardless of how much their income is, you just have to decide on how you want to approach it:
- Target your “freedom number” and work out your contribution amount to achieve this goal, or
- Save a portion of your income
- The traditional wisdom is to invest 10% of your income in a long-term wealth-accumulation plan if you’re in your 20’s and at least 25% if you’re passed the age of 35); extreme wealth-builders on the other hand, challenge this wisdom and aim to save a much larger percentage of their income, so it all depends on how fast you want to get there, how comfortable you are with your wealth-accumulation strategy and if whether on not you can keep the consistency.